Question

Distinguish between explicit cost and implicit cost with examples.

Answer 1

$\begin{array}{cccc}S.N.& Basis& ExplicitCost(Rs.))& ImplicitCost(Rs.)\\ \left(i\right)& Meaning& \text{Explicit cost refers}& \text{Implicit cost refers}\\ & & \text{to the actual}& \text{to the cost of self}\\ & & \text{payment made to}& \text{supplied factors of}\\ & & \text{outsiders for}& \text{production}\\ & & \text{hiring services of}& \\ & & \text{the factors of}& \\ & & \text{production.}& \\ \left(ii\right)& \text{Expenditure}& \text{These expenditures}& \text{These expenditures}\\ & \text{in cash or}& \text{are incurred and}& \text{are incurred on self}\\ & \text{Credit}& \text{payment is made in}& \text{supplied factors,}\\ & & \text{cash or on credit}& \text{hence no payment}\\ & & \text{basis.}& \text{in cash or on credit}\\ & & & \text{basis is made.}\\ \left(iii\right)& \text{Parties involved}& \text{Owner and outsiders.}& \text{Only Owner.}\\ & \text{Examples}& \text{Wages paid to the}& \text{Interest on own}\\ & & \text{employees, rent}& \text{capital, Rent of}\\ & & \text{paid for hired}& \text{own land etc.}\\ & & \text{premises, interest}& \\ & & \text{on loans etc.}& \end{array}$